TOP NEWS

Wednesday, October 31, 2007

Interview with Jim McCarthy, Goldstar Events

Jim McCarthy is co-founder and CEO of Goldstar Events (www.goldstarevents.com), a successful and very interesting Internet company which connects people with local concert and other live event tickets through its online service. Goldstar runs a service which keeps people informed of upcoming live events, and offers half price tickets for last minute attendees. Jim spoke with socalTECH's Ben Kuo about how the company started, how they bootstrapped the company, and where the firm is heading now.

What's the story behind how you started Goldstar Events?

Jim McCarthy: The company was started by me and two other friends of mine, one who is a Geocities veteran like I am, Robert Graff, and the other is Rich Webster, who went from medical devices to the Internet around the time of the boom. The three of us were at a venture backed education company after Geocities sold to Yahoo. We were there for two or three years, and started Goldstar as the founding team. In 2002, we launched the site, really through just the labor of the three of us and some friends, to see if we were right and the concept had legs. Two or three months later, we saw clearly that the concept made sense to consumers and live entertainment venues. The company is now about 5 and a half years old, and we're really the category leader by a long, long margin. We're one of the most successful direct marketers in the whole world. To give you a summary of what the business is all about, from the consumer's point of view, Goldstar is a place to go to always find something great to do, instead of just going to another movie, or handing around and renting a DVD, or just have another boring night. For the consumer, the point is to have lots to do. You can sign up for free, and we make sure you have a steady stream of deeply discounted opportunities for live entertainment, theater, comedy, pro sports, and even things like spas and massages, wine tasting, and sushi classes--anytyhing which falls into the category of entertainment. We've got a wide range of things to do. We have thousands of venues whose events are being sold at a deep discount, 50 percent off at our site.

Why would venues want to do this?

Jim McCarthy: It fits very nicely into overall trends for consumption in society. Ten or twenty years it ago, it was much harder to be successful being a niche marketer of entertainment. However, if you look at iTunes, and look at this generation, and the amount of personalization and customization that has happened with entertainment because of technology improvements, there's now lots more live entertainment. However, the popularity is spread over a much wider range of things. In the past, relatively few popular things dominated. However, now, everyone is competing for an audience.

We now have two thousand venue and producer relationships around the country. You'll find very few companies like ours with that many venues. The reason for that is those venues see many benefits to working with us, is we are very effectively marketing what they are selling. Half price tickets or not, we are doing a good job of getting people to go to their events. Just from that point of view, marketing through Goldstar is very effective for venues, who are seeing an effect on direct sales, and on their own box office sales just from the marketing power of our emails. That's very important. On the other side, which is very nuts and bolts, is the yield management benefits. We don't typically talk about yield management, but it's similar to as if you were running something like the airline industry's Sabre. Just like the airlines and hotels, you can't sell tonight's ticket tomorrow. It doesn't cost anything to work with us, and money--even if at half price--goes straight to the bottom line. It's all incremental revenue with zero cost. Also, we find that people are becoming aware of the venues, and become great fans. It's a very, very attractive proposition. It's another marketing tool in their arsenal, that is very flexible and extremely powerful. Without bragging, we think it's the most effective tool for marketing live events in the world.

I know you started in LA, where is the service available now?

Jim McCarthy: We are in the eight largest live entertainment marketing in the country, with two exceptions. We are in the critical markets of Los Angeles, San Francisco, San Diego because it's close, Las Vegas, New York, and Boston. That's about 1/3 of the U.S> population, and we have good coverage in those places. There are plenty of events and members.

How would you contrast starting this up versus your experience at Geocities?

Jim McCarthy: The first contrast is that I didn't start at Geocities when it was new. I joined when it was in the middle of its lifespan. Even the, it had million and million of users every day. The great education I got from that, was how to learn things very fast using Geocities built in audience. If you wanted to try something out, you could get data almost immediately. I remember one time, it was my first week at Geocities, and I was responsible for launching a marketing campaign. It was Friday mid-day, so I went to the traffic manager, they said--stay here, let's get some data--and it never occurred to me that we could have gotten the data just a few minutes after it launched. They told me to hold on a second, and the thing already had 16,000 impressions, we knew what the click through was, and that held through the lifetime of the campaign. So if you can imagine, going from an environment with all the traffic you could possibly use, to mold and play with, to a startup with no customers and nothing to sell. It was a very different kind of experience. Building the audience, and building the offering was quite a challenge. It definitely took us a while to break that vicious cycle. But, once it was broken it turns in your favor. The more customer we got, the more inventory we received, and the more relationships we could build, and the better the venue relationships became. It built on itself. At this point, there's a lot of momentum.

When did you see that turning point?

Jim McCarthy: In LA, I think it took us about a year.

That seems pretty short...

Jim McCarthy: It wasn't by any means done, but at that point we didn't have to blow on the coals all the time to make it go. There was plenty more for us to do, but after the initial period--getting the spark going, like kindling, it gets a lot easier.

How you funded and how did you get the company going?

Jim McCarthy: We were fortunate that in that we were able to fund much more initially than what a traditional bootstrap may have been able to. We were able to give the company a little bit of fuel without having to turn to anyone outside the company. We had much more resources that most people have the opportunity to take advantage of. We haven't taken any money, and the three of us now own almost all of it, with the rest of it with our employees and in employee stock options and shares.

So what's the big thing for you now?

Jim McCarthy: There's a number of things. First of all, we're still relatively new in the East. Our oldest market east of the Mississippi is Chicago, which is just over two years old. New York, Boston, and DC are about a year old. The experience with them is a bit less trying than the early days of the West Coast markets--we have many more resources and relationships to bear on those. But, we see a bit part of our business nurturing and growing our East Coast markets. We're getting their really fast in New York, obviously it's the biggest entertainment market in the country, and it's been the fastest launch for us, and the fastest to get out of the gates. I think it will surpass all of the other areas in terms of size. We've been very happy for the continued growth for us, and we're now preparing ourselves for adapting our business model for dealing with cities in the next tier of population--cities like Miami or Atlanta, which don't quite have the density of consumers or entertainment events.

Frankly, another one of our concerns is to keep up with features and functionality which members want. For example, user reviews for live entertainment. It's probably a surprise for lots of people, who assume that there's some source for live entertainment review. We have more than a quarter of a million ratings of live events that you can see, because we sell so many tickets. Because you have to have bought a ticket to rate an event, the quality of our ratings is very high, and there are a whole lot of them. For example, there was Avenue Q at the Ahmanson, and we sold a lot of tickets for that. If you look at our archives, we probably have around 528 reviews for that event, which far, far exceeds the number you would see at Yelp or Yahoo Local. That feature came out of a request from members--we are constantly chatting with members on a rolling basis, talking with our members about topics for whatever reason. It started coming on strongly that was one of the features they wanted us to add, something that sounded good and cool. We didn't have to be smacked more than a few dozen times before we did that, and it has been very important. We've learned through research that users trust a solid source of user reviews almost as much as they trust a good friend.

I know you often talk to companies that are often looking for capital. We're not in the market for capital, but we're always in the market for partners. In particular, we are looking for distribution partners, in terms of people who produce a high volume of entertainment content. We're always building those partnerships. And, we're always in the market to talk to those partners. There may come a day when we do take a strategic investment to help forge a partnership, on a medium term horizon.